Gaza City - Israel upped its pressure on Palestinian militants Thursday, with ground troops advancing close to the centre of Gaza City in one of the worst days of fighting since the assault began and amid growing signs that the offensive could be in its final days.

United Nations Secretary General Ban Ki-moon told a news conference in Tel Aviv that the elements were there for a ceasefire to be in place "reasonably soon," but added that how soon depended on the "political will of the Israeli government."

Both Ban and German Foreign Minister Frank-Walter Steinmeier have spoken of an immediate truce, which would see both sides end the fighting, to be followed by a more durable truce.

During that initial halt to the fighting, the parties would discuss a more durable truce, including the guarantees and mechanisms Israel is demanding to end arms smuggling into the Gaza Strip.

While the terms were being worked out, the Israeli army would remain in the salient.

Hamas has said it is amenable to a temporary halt to the fighting, but rejects any long-term truce with the Jewish state. Senior Israeli Defence Ministry official Amos Gilad was due to meet Egyptian officials in Cairo Thursday to hear how Hamas interpreted a ceasefire.

Ban and Steinmeier were in Israel for talks with officials as part of a diplomatic push to find an end to the Israeli offensive, in its 20th day Thursday.

But while the secretary general and Germany's top diplomat were holding talks with Israeli leaders in Jerusalem and Tel Aviv, Israeli ground troops were taking on Hamas and other militants as close as 1.5 kilometres from the city centre, Gaza City residents said.

Backed by heavy tank shelling, the troops concentrated in the southern Tel el-Hawa neighbourhood in their deepest push yet into the city of 400,000.

During the fighting, three shells hit a United Nations compound in the centre of Gaza City.

The shells set ablaze a warehouse storing food and medicine and spread to other sections of the compound, which houses aid agencies and where some 700 people were seeking refuge from the fighting.

One wing of the al-Quds hospital was also on fire, UN officials said, and two buildings housing journalists were hit.

Residents of Tel el-Hawa were panicking in their residential buildings, some of them high-rises, while keeping doors and windows shut, and calling on international organizations to evacuate them.

Thousands were also fleeing their homes. Ambulances were unable to reach the area amid the heavy battles.

Heavy exchanges were reported in the nearby, but more southern, Zaytoun neighbourhood.

Al-Jazeera reported that tanks had also pushed close to the house of Mahmoud al-Zahar, Hamas' leading hardliner. Five of his bodyguards were reported killed during the night.

An Israeli military spokeswoman said local militants were confronting the ground troops with mortar shells and small arms, sparking "very intense" exchanges of fire.

She said the tanks were returning fire only toward the sources of the Palestinian fire.

Hamas and other militant factions in turn stepped up their rocket attacks, firing approximately 20 into southern Israel by early afternoon, more than the average for previous days.

One struck in a garden of a home in the town of Sderot, located just a few kilometres to the north-east of the strip, whose family had escaped into the safe room of the house. The Palestinian toll for the entire Israeli offensive now stands at at least 1,063 dead and some 5,000 injured, according to Gaza emergency services chief Mo'aweya Hassanein.

Some 13 Israelis, including nine soldiers, have been killed in the ground fighting in the Gaza Strip and by Palestinian rocket fire, which has also wounded dozens more.

In his news conference Thursday, Ban said that the number of casualties in the Gaza fighting had reached an "unbearable point" and it was "unacceptable" that more people would be killed in the fighting.

It was equally unacceptable that almost 1 million people in Israel lived day and night in fear of Hamas rockets from the Gaza Strip, he said.

Israel launched its Operation Cast Lead on December 27, in response to massive rocket barrages form the Hamas-controlled Gaza Strip on its southern towns and villages. After a week of incessant air strikes, ground troops crossed into the Gaza Strip on January 3. (dpa)